Sources say drug ring operates with police protection


WASHINGTON -- A large-scale drug smuggling ring has operated in the Lexington, Ky., area for several years with protection from state and local law enforcement agencies, Justice Department sources say.

The sources said the investigation of Lexington businessman James P. Lambert, who was indicted on numerous drug charges Thursday, was hampered by lack of integrity among some members of the Kentucky State Police, the Lexington police and the Lexington office of the FBI.


'The hardest thing was maintaining secrecy,' one official said of the two-year investigation.

Because of the extreme sensitivity of the case, federal agents were brought in from outside Lexington, and investigative efforts were not coordinated with state police or the local FBI until after the agents conducted searches on Lambert's home, said the justice department officials, who asked not to be identified.

The grand jury Thursday indicted Lambert, 44, on 60 drug counts and Lexington horsewoman Anita Madden in the leaking of transcripts of the grand jury's proceedings dealing with Lambert.


Lambert was indicted on one count of conspiracy to distribute cocaine and 59 counts of possession with intent to distribute or actual distribution of cocaine, marijuana or methaqualone, another name for quaaludes.

The 67 total counts involving drug charges outlined a series of events that occurred between Jan. 1, 1982, and April 21, 1983, during which several pounds of cocaine were distributed.

Mrs. Madden, a former state racing commissioner, was indicted along with Lambert and two other people for conspiracy, obstruction of justice and theft of government property, all felonies. Lambert had obtained a copy of the grand jury proceedings while he was a target of the panel.

Lambert's two Lexington-area residences were raided April 21 of last year after a lengthy surveillance by federal agents that included videotaping, wiretapping and the use of hidden microphones.

The indictments were the culmination of a two-year federal investigation into Lambert and his tightly-knit organization of alleged narcotics and drug delaers. FBI agents raided two Lexington-area homes belonging to Lambert in April, 1983 and searched them for more than seven hours.

The home of Kirkpatrick was raided at the same time. Evidence secured during those raids was presented to the grand jury.


Federal sources said Lambert's associates allegedly span several states and include prominent businessmen, politicians, nationally-known sports figures, horsemen and gamblers.

The investigation was begun in January 1982 by former Kentucky State Police Sgt. Raph Ross under the direction of former Justice Secretary Neil Welch. Following Ross' arrest on wiretapping charges on an unrelated investigation, he turned over intelligence he had gathered to agents assigned to a special federal grand jury in Lexington, the sources said.

The sources said the investigation led federal agents to Florida, New York, California, Nevada and South America, and was directed by DeFalaise and his assistant Robert Trevey.

Legal wiretaps and other electronic eavesdropping devices were installed in Lambert's Lexington home on Old Dobbin Road, which had purchased from Brown in 1977 for $130,000.

Lambert has been a business partner of Brown since the late 1960s, records show. A Lexington police department criminal intelligence report indicated Lambert was a partner with Brown in Kentucky Fried Chicken, Lums Inc., and Ollies Trolleys restaurant franchises.

An internal memo from the office of former Gov. Brown indicated that Brown and Lambert maintained a business relationship at least until 1982. In the June 1982 memo, Brown asked Lambert to keep him advised of pending litigation against a former Cincinnati suburban nightclub known as Trumps. Phillip Block was the manager of the club.


At a press conference in May, Brown admitted he was once a partner in the nightclub.

Brown was unavailable for comment Thursday night.

Trumps was the subject of several Ohio state and federal investigations during its time of operation, according to justice department officials. Lums Inc. was the guarantor of the Trumps' lease with the shopping center's owners where the club was located.

Lambert's telephone toll records revealed he frequently placed calls in 1982 to phone numbers that were listed to Brown and his wife Phyllis George, in Frankfort, Lexington, Miami and New York.

Lambert frequently visited Cave Hill, the Brown's Lexington residence, according to guest ledgers at Cave Hill during Brown's tenure as governor.

Lambert accompanied Brown and his wife to Churchill Downs on the state's helicopter in 1982, while Lambert was under active investigation, according to a state Department of Finance's Office of Air Transport flight report.

Lambert has been the subject of FBI investigations since at least 1979. An FBI memorandum marked confidential states Lambert and several other Lexington residents were being probed 'in connection with prostitution, corruption, murder, extortion and narcotics.'

Lambert has also been the target of probes by the KSP and Cincinatti police in connection with the death of Rebecca Moore of Cincinnati. Miss Moore, who worked at Trumps, left her Cincinnati home Dec. 16, 1980, to attend a party at Lambert's Lexington residence, according to state police reports.


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